Friday, July 6, 2012

The Problem with the Alaska Dispatch ...

In a piece published earlier this week (Alaska Dispatch: The risk of rattling the cages), the Alaska Dispatch's Editor Tony Hopfinger uses an event at a fundraiser to defend the Dispatch's recent oil reporting.  In the piece, Hopfinger claims that he -- and the Dispatch -- are writing from the perspective of "Alaska Inc. ... the owner of hundreds of billions of dollars of petroleum and mineral resources."

Frankly, the article helps to explain much of what has gone wrong at the Alaska Dispatch.

In its early years, the Dispatch appeared to want to be a news source, approaching oil and other issues without bias or perspective.  The result was impressive; under oil reporters Rena Delbridge and Patti Epler, the Dispatch became the go to source for information and insight into oil and political issues affecting the state. 

I encouraged my firm to advertise on the Dispatch in order to support and associate with what I considered to be outstanding reporting.  I described the Dispatch to friends and others as Alaska's version of Politico, a national publication that I believe is the best at reporting on politics and policy at the federal level.  And I also wrote and polished pieces that I hoped were good enough for publication in what I considered one of the most important outlets for reasoned thought in Alaska.

Something happened along the way, however.  With the departure of Patti Epler, the Dispatch ceased focusing on being a pure news source, at least on oil issues.  Instead, it appeared to change roles and, as Hopfinger now describes it, sought to become a voice for "Alaska Inc."  It no longer delivered the news in an unbundled package.  Instead, the news it reported started coming mixed with editorial commentary in a way that made the reader (at least me) wonder about whether the actual news was being reported fully or fairly.

That approach might have been fine -- and even welcome -- if, as with The Economist, for example, the Dispatch brought a clear economic mind to the discussion.  But it has not; instead, it has become much more like a mirror version of the old Alaska Standard, publishing, at least from its own writers, a muddled and more often than not, emotional, rather than closely reasoned view of things.  Rather than Politico, the Dispatch now much more resembles the New Republic.

Hopfinger's view of the current discusion around oil taxes is a case in point.

In the article, Hopfinger argues that until the producers commit "to developing enough additional oil to make up for the billions of dollars of loss to our state treasury ... I and some on my staff will keep questioning Gov. Sean Parnell’s push to 'reform' state oil taxes."

Hopfinger does not explain in his extended piece, as would The Economist, why that best serves the interests of "Alaska Inc."  Frankly, we can easily think of why that could not be the case.  Encouraging continued investment, even if it resulted in reduced tax revenues to state government, could result in overall economic activity that better mirrored the current state of the industry in other parts of the US (e.g., North Dakota) and the world (e.g., Norway).  While Alaska state government might not realize as much, overall Alaska GDP could be higher.

Moreover, reduced government take also could lead to the increased exploration and discovery of new resources on state lands.  Alaska's current exploration tax credit policy, as embodied in ACES, is a dead end road.  ACES significantly subsidizes exploration activities to be sure, but reverts to the higher rates when its time to develop anything the exploration efforts have identified. 

The result is that only minor industry players have made extended use of the exploration provisions.  Their hope, to be honest, is to find something that they then can sell to bigger players, in a manner similar to the hope that startup software companies have that they can sell any new ideas they develop to Google or Microsoft.  That hasn't happened, however, again because the higher ACES rates would apply to any such development.

Reduced production taxes could entice more substantial players into making more substantial exploration investments, and more substantial players to invest in the development of any exploration plays the smaller companies might find.

Hopfginer's piece analyzes none of these alternatives.  Instead, he -- and the Dispatch -- simply want something for nothing. They want industry to guarantee continuation of the same revenue stream to state government, regardless. In his view, the state shouldn't make any "concessions" until that guarantee is achieved. Its as if the revenue levels resulting from ACES were written on golden tablets of some sort and are, now, inalienable rights.

The available evidence suggests, however, that the result of the current ACES revenue levels will be the exact opposite from what Hopfinger claims to want. Industry investment will continue to stay at minimum levels as long as the tax levels remain the same. Production will contnue to decline, and Alaska "Inc." will continue to realize increasingly lower revenue levels.

But that argument is largely beside the point about what has gone wrong with the Dispatch.  What has gone wrong is that the Dispatch has turned from what it once excelled at -- being a source for pure news -- to now requiring that its readers take a bundled dose of opinion along with the Dispatch's version of the news.  The fact that the opinion is muddled only adds to the problem.